In the past couple of months, though, the ride for marijuana stocks has turned rougher, and that's left Tilray licking its wounds. Yet even though the stock is now well off its highs, Tilray investors are still enjoying huge gains so far in 2018 -- and many see a brighter future for the industry as a whole and the company in particular.

How Tilray's IPO went

Tilray made waves in June when it filed to do an initial public offering. Rather than doing its IPO on a Canadian exchange, Tilray decided to go directly to the Nasdaq Stock Market. By doing so, Tilray hoped to capitalize on the mass of U.S. investors who wouldn't have been comfortable buying a stock that was listed solely on Canadian stock exchanges.

Tilray priced its stock for the IPO at $17 per share, but once shares hit the public market, they quickly jumped in price. At the close of its first day, Tilray stock had soared more than 30% to $22.39 per share -- which formed the base for its subsequent 400+% gains -- and the stock jumped to nearly $35 per share within the first few days of trading before falling back.

Stats on Tilray

Revenue, Past 12 Months

$32.7 million

2017 Revenue

$20.5 million

Net Income, Past 12 Months

($39.6 million)

2017 Net Income

($7.8 million)

Source: Tilray.

With funding in place, Tilray was able to move forward with aggressive strategies to grow more quickly. Tilray already has several production facilities in place, and efforts to expand those locations should put the company in position to become one of the major suppliers of cannabis within the next few years. Moreover, Tilray identified the cannabis-derived oil market as a major potential source of expansion, with the ability to deliver much higher-margin sales than dried cannabis. Tilray hopes that by offering value-added oil products, it can build a name for itself and boost profits over the long run.

Tilray's massive volatility

Tilray responded favorably to investor demand, rising as high as $300 per share briefly. Yet part of those gains likely stemmed from the way in which the marijuana stock came public. In its IPO, Tilray only sold a small portion of its total shares, keeping the supply of publicly traded stock small. That's had the effect of amplifying share-price moves during turbulent time periods. Moreover, it's made trying to sell the stock short practically impossible, with high borrowing costs and massive risks deterring even the most fervent marijuana bears from putting their capital on the line.

Moreover, naysayers point to the fact that Tilray's valuation has vaulted far out in front of that of other companies with more extensive operations and assets. Given that Tilray trails many of its peers in terms of production capacity, it's likely that the company will have to funnel future cash flow toward expansion efforts for years to come. That, in turn, will keep Tilray from posting profits for the foreseeable future, and it'll be tough for the stock to maintain its upward trajectory with the red ink flowing on its income statements.

Marijuana leaf on top of a pile of $100 bills.

Image source: Getty Images.

Can Tilray keep climbing?

That said, Tilray does have some things going for it. Access to capital is a big plus, as it's still viable for the company to offer more shares to raise funding for expansion projects. Yet in order to avoid a prolonged downturn, Tilray needs several things to go well:

When insiders are allowed to sell their Tilray shares at the expiration of the post-IPO lock-up period in mid-January, they must not flood the market with stock.

The company has to build a brand in the lucrative medical cannabis industry worldwide, with current efforts to become an international powerhouse paying off with strong market share.

The industry as a whole has to be careful not to let overproduction lead to precipitous price declines, with Tilray hopefully being able to turn to oil-based products to sustain margins.

If Tilray can accomplish all of those things, then its gains so far in 2018 could turn out to be just the beginning of a strong history for the cannabis company. If not, though, then Tilray stock could have farther to fall from its recent highs.